June 7, 2010

Court Thwarts Governor’s Attempt to Investigate Debt Collection Firm

In a 4-to-3 decision, the Georgia Supreme Court has upheld a ruling by a Cobb County court prohibiting a state official from investigating a law firm that collects debts on behalf of creditors.

Background

Joseph Doyle is the Administrator of the Fair Business Practices Act of 1975, Georgia’s principal consumer protection law that prohibits deceptive practices involving consumer trade. Doyle enforces the law through the Governor’s Office of Consumer Affairs in the executive branch. In 2008, after receiving complaints alleging abusive debt collection practices, Doyle issued an “investigative demand” to Frederick J. Hanna & Associates, P.C., requesting documents and information.

When Hanna refused to provide the information, Doyle petitioned the court to force Hanna to comply. The court refused, concluding that the demand amounted to an attempt to regulate Hanna’s law practice. Such regulation violates the Georgia Constitution’s separation of powers requirement, the court concluded, and “constitutes an impermissible interference by the executive branch into the exclusive jurisdiction of the judicial branch of government.” Under the Constitution, the judicial branch has the exclusive power to regulate the practice of law. Doyle, represented by Attorney General Thurbert Baker’s office, appealed to the state Supreme Court. Hanna is represented by the former Attorney General, Michael Bowers.

Majority: Governor’s Office Cannot Regulate Practice of Law

“The issue in this case is not whether the [Fair Business Practices Act] applies to a law firm’s own commercial or entrepreneurial activity when, for example, it attempts to collect fees from a client,” says today’s majority opinion, written by Presiding Justice George Carley. “Instead, this case involves [Hanna’s] attempts to collect moneys that were owed to its clients.” Therefore, “we hold that the representation of clients by a law firm does not come within the [Fair Business Practices Act] even if certain services were provided by non-lawyers within the firm and could have been offered by a company without any attorneys. If [Hanna’s] employees engaged in wrongful conduct against debtors, the remedy must be found outside the [Act].” Chief Justice Carol Hunstein, and Justices Robert Benham and Hugh Thompson join in the majority.

Dissent: Lawyers Should Not Abuse Public and Violate Consumer Protection Laws

In the dissent, however, Justice Harold Melton writes that the Fair Business Practices Act “is a law of general application that has nothing to do with impermissibly regulating the practice of law in violation of separation of powers.” As a result, “I must respectfully dissent from the majority’s erroneous conclusion that the remedies relating to [Hanna’s] allegedly abusive debt collection practices … must be found outside the [Act].‟ Investigating violations of the law that happen to involve lawyers does not automatically amount to impermissibly … regulating‟ the practice of law, as a lawyer who violates the law is just as subject to investigation as any other common offender.” Furthermore, “an attorney cannot abuse members of the public by engaging in unfair and unlawful debt collection practices and then shield himself from investigation under the [Act] because he was engaging in such unfair practices … on behalf of a client,” the dissent says. “A lawyer can, and must, practice law without punching people in the face. And a lawyer can, and must, practice law without violating the [Fair Business Practices Act] by abusing members of the public.” Justices P. Harris Hines and David Nahmias join in the dissent.

The Campaign Money Connection

A quick check of the Georgia State Ethics Commission web site reveals a disturbing connection between the actors involved in this case and the judges involved. The attorneys involved, including Mr. Hanna and Mr. Bowers, have regularly contributed substantial sums to the campaigns of the trial and appellate court judges that heard this case.

Bowers has donated substantial sums to the campaigns of Georgia Supreme Court Justices Benham, Hunstein, Melton, as well as the election campaign of the trial court judge, Lark Ingram of Cobb County Superior Court. See details.

Hanna has donated $10,000 to Thurbert Baker’s campaigns for Attorney General, the office tasked to enforce state law for the executive branch of Georgia. See details.

Debt collection attorneys can use the legal process to locate and collect assets, but consumer protection laws, according to this decision, cannot be used to investigate law firm debt collection practices. The implication is that attorneys are “above the law.” What relief is available to consumers who are subject to abusive debt collection practices by law firms? Are they supposed to file bar complaints and rely upon the State Bar of Georgia to regulate lawyers? As the court notes, non-lawyers may engage in debt collection and would be subject to regulation by the Governor’s office; therefore, two firms may engage in the same conduct by not be treated equally under the law.

The sad thing about this case is it is just an investigation of consumer complaints. In all likelihood, Hanna & Associates did not break the law. They go after people who are trying to cheat their creditors. Those who complain about debt collection practices are trying to get away with cheating creditors and have strong financial incentives to attack those trying to collect a valid judgment. Sunshine is a great antiseptic. When there is an apparent effort to cover-up, prevent investigation, and use status and money for unjust influence, minor incidents can lead to major infections. A case like this sends a terrible message to the public.